The Houston Chronicle | By John Otis | July 13, 2003
Bibiano Mendoza has spent much of his life gingerly plucking crimson coffee cherries by hand at their peak moment of ripeness.
Now, instead of pondering retirement, the sunburned, 60-year-old grandfather frets about where he'll get his next meal.
Mendoza and 82 other field hands have been squatting illegally on this coffee plantation in northern Nicaragua ever since their employer defaulted on loans and lost the property to the bank. With no job prospects and nowhere else to go, they have survived for the past two years by growing a little rice and picking wild fruit.
"In good times, we didn't make much money," says Mendoza, who used to earn a daily wage of $ 3 - about the price of a grande latte at Starbucks.
"But now, we don't even eat well," he says. "Sometimes, it's just plantains and salt. Sometimes there's more salt than plantains."
Mendoza's slide from merely poor to the ranks of Nicaragua's desperately impoverished can be directly linked to the dynamics of global free trade, which have driven world coffee prices to historic lows.
Championed by Washington, the World Bank and the International Monetary Fund, free-market forces have swept across Latin America like a tsunami since the end of the Cold War, leaving some spectacular success stories in their wake.
Yet many analysts depict the crash of the coffee industry in Nicaragua and other Latin American nations as damning evidence that globalization is churning out more losers than winners among the region's have-nots.
"The sad reality is that there is all of this wonderful coffee land, yet the farmers can't make a living," says David Griswold, president of the Specialty Coffee Association of America, a trade group representing importers of quality coffee. After years of globalization, he says, "at some point, you have to stop and ask: Is the world better off now?"
The coffee crisis has been brewing since 1989, when an international accord that had stabilized supply collapsed, leading to a glut and plummeting prices.
In Nicaragua, hundreds of plantations have shut down, throwing thousands of peasants like Mendoza out of work. Those lucky enough to find temporary field jobs often get paid in food. The unemployed sometimes go hungry.
In the northern coffee-growing state of Matagalpa, half of all children suffer from malnutrition, according to the U.N. World Food Program, which is delivering emergency rations to 60,000 people in the zone.
"These kids are lucky if they eat once a day," says Gloria Elena Moraz, the lone health worker at a tiny clinic in the mountains of Matagalpa.
Free-market purists, however, insist that globalization is a yellow brick road to riches. Rather than a cautionary tale, the coffee debacle is a clear signal from the market, they say, that Nicaragua must develop a new generation of exports, such as melons and sun-dried tomatoes.
"It's not a coffee crisis. It's a planning crisis," says James Vermillion, director of the U.S. Agency for International Development in Nicaragua.
But since 1979, Nicaragua has endured a leftist Sandinista revolution; a civil war led by U.S.-backed Contra rebels; a banking crisis; and Hurricane Mitch. The country lacks decent highways, deep-water ports and, because most Nicaraguans have never finished elementary school, an educated work force.
To start jockeying now for position on the global economic stage, some say, is akin to joining a game of Monopoly after all the best properties have been snapped up.
Rather than gamble on new exports, Nicaragua stubbornly stuck to tradition. German immigrants first planted coffee in the rich volcanic soil here in the 1800s. Until a few years ago, when the market imploded, the crop provided 25 percent of export income and nearly half of all jobs in the countryside.
As he wanders between rows of 5-foot-tall trees, their branches full of cherries that contain the seeds, or beans, that produce coffee, Mendoza admits that he and his fellow field hands feel cornered. They dream of someday securing legal title to the 700-acre plantation they occupy. But they have no money to maintain the coffee groves or to finance a conversion to something else. And they've never heard of sun-dried tomatoes.
It's all they can do to keep the jungle from reclaiming the farm.
"This is better than stealing," says Mendoza, now sweating as he whacks weeds with a machete. "But it's not much of a life."
For most of the past half-century, coffee - one of the world's most labor-intensive crops - was deemed too crucial to be left to the whims of the free market.
Fearing that low prices could kick-start political unrest and nudge producer countries in Latin America, Africa and Southeast Asia into the communist bloc, the United States backed a managed market for coffee during the Cold War. In 1962, 66 producer and consumer nations agreed to export quotas to limit the supply of coffee.
Under the pact, raw coffee prices on the world market rarely fell below $ 2 a pound in today's dollars. Few got rich, but small coffee growers "could feed their families well, send their children to school and afford decent housing," says a recent report on the coffee crisis by the development group Oxfam International.
But with the fall of the Berlin Wall and the rise of free-market ideology, the United States - the world's No. 1 coffee consumer - pulled out of the agreement, causing the quota system to collapse.
Today, new players, such as Vietnam, are producing bumper crops. Other nations, such as Brazil, have ditched some of their high-quality, mountain-grown arabica coffee, which must be farmed by hand, for cheaper, less flavorful robusta varieties that can be harvested by machines. Worldwide demand for coffee has flattened as consumers have switched to soft drinks.
The result has been oversupply and a price nose dive. The composite price for both arabica and robusta coffees bottomed out last August on the commodities market at 43 cents a pound - the lowest real price in 100 years.
In recent months, the price has rebounded slightly, but it remains well below the cost of production for Central American farmers, many of whom receive less than half of the market price.
"Your grandparents made more money in coffee than you do," Griswold, of the Specialty Coffee Association, told growers at a recent ceremony to launch a new marketing campaign for Nicaraguan coffee.
But even though raw coffee prices have plunged by more than half since 1998, the cost of a standard can of coffee at the supermarket has dropped just 25 percent, according to the U.S. Bureau of Labor Statistics.
Meanwhile, Oxfam says, big roaster companies continue to make tidy profits on their coffee brands. Four companies - Sara Lee, Kraft, Nestle and Procter & Gamble, the makers of Hills Bros., Maxwell House, Nescafe and Folgers - purchase nearly half of the world's coffee crop.
The crisis, most analysts say, hurts only poor countries that grow the coffee and can least afford a price meltdown.
A decade ago, producer nations earned about $ 11 billion from a worldwide coffee market worth $ 30 billion. Now, according to the London-based International Coffee Organization, they receive half that amount from a coffee market worth more than $ 70 billion.
In Nicaragua, where the government needs every penny of foreign exchange it can get, the value of the coffee crop has plunged from $ 171 million to $ 73 million over the past three years.
Unemployed coffee pickers and their families often block highways, camp out in town parks and march on government offices to demand help. A recent agreement with the International Monetary Fund, however, requires Nicaragua to rein in state spending and restricts the government's ability to carry out antipoverty campaigns.
For now, the only relief comes from the World Food Program.
On a rainy afternoon in La Escalera, a mountain hamlet surrounded by coffee groves in Matagalpa state, wives of coffee pickers line up outside a shack where volunteers dole out rations. Each needy family receives a monthly allotment of 26 pounds of corn, 6 pounds of soy-corn cereal and a pint of cooking oil.
"We never used to distribute food in the coffee zone," says Sabrina Quezada, a World Food Program spokeswoman. "But due to the malnutrition, we had to intervene."
As the drizzle lets up, Herminio Palacio, who farms seven acres of coffee near La Escalera, says the crop was a sure bet when prices were higher. But now, at the current price of 64 cents a pound for arabica, the strain grown by Nicaraguan farmers, Palacio is in the red and can't afford to fertilize his coffee trees. Without the chemical boost, his yields have fallen by half.
"We can't make money on coffee anymore," muses Palacio, 56. "I don't know what the problem is."
To free traders, there is no problem. Under globalization, the old and obsolete in one country make way for the new and efficient in another.
"Admittedly, it is never pleasant for market incumbents to be displaced, especially when they live in poor countries that offer few alternative livelihoods," writes Brink Lindsey in a recent report on the coffee crisis published by the Cato Institute in Washington. "But creative destruction lies at the very heart of the market process."
Still, blithely ignoring the wrenching social upheaval south of the border seems at cross purposes with a whole range of U.S. foreign policy goals.
In Mexico and Central America, throngs of jobless coffee pickers are heading for the United States in hopes of illegally crossing the border and finding work.
In Colombia, the logic of the market has persuaded some farmers to replace money-losing coffee with high-profit opium poppies and coca, the raw materials for heroin and cocaine.
Most of the region's coffee groves are covered by shade trees, and switching to other crops would accelerate deforestation. Even if farmers attempt the transition, world prices for many of the crops best suited for Latin America, such as sugar and peanuts, have been driven down by massive U.S. subsidies for American farmers.
"Our business practices (need) to be consistent with our foreign aid practices," said Rep. Sam Farr, D-Calif., at a hearing on the coffee crisis before a U.S. House subcommittee last year. "We cannot say that one of our most important policies in Latin America is trying to stabilize a country and at the same time drive down the principal product of those countries to a rock-bottom low."
Anticipating pay dirt, Frank Lanzas nervously paces the ballroom of a Managua hotel at the start of an Internet auction for gourmet coffee.
As bids roll in from Australia, Ireland and Japan, he seems worlds apart from his home state of Matagalpa, where many coffee farmers are going bankrupt.
In a way, he is.
On a 440-acre coffee estate inherited from his father, Lanzas grows a fine type of arabica known as caturra. Solidly upper class, he has access to bank loans that allow him to buy fertilizer, test his plants for diseases and recycle the water used to wash his beans.
Lanzas' careful production methods paid off last month when his beans won the "Cup of Excellence" contest as Nicaragua's best coffee. Now, they pay off at the auction, as a Tokyo coffee house bids $ 7.05 a pound for Lanzas' beans - more than 10 times the world price for arabica.
"This is just what I needed," says a grinning Lanzas, who will get $ 46,530 for 44 gunnysacks of his aromatic coffee.
The lucrative new market for so-called specialty coffee, available in coffee bars and at high-end supermarkets, might seem like Exhibit A for the wondrous benefits of globalization. But even though sales are booming, experts call specialty coffee a life raft that will keep just a small minority of farmers afloat.
Unlike standard arabica, specialty coffees garner premium prices by highlighting careful production techniques.
Like fine wine, some specialty coffees play up their country of origin, geographic microclimates and heirloom varieties. Others spotlight their earth-friendly production techniques and "fair trade" marketing policies.
The fair-trade movement tries to set a good example for big roaster companies by enlisting socially conscious importers to pay farmers a fair price that covers production costs. The current fair trade price for arabica is $ 1.26 a pound, about double the market price. But even though the demand for fair trade and gourmet coffee is growing, they make up just 20 percent of the volume of U.S. sales.
Most coffee drinkers still buy cheaper brands that blend standard arabica with lower-quality robusta beans. If too many farmers plant specialty coffee, analysts point out, prices will drop.
What's more, Latin American farmers often lack the money, technology and marketing savvy to grow specialty coffee.
"We need to create a whole new model that's not subject to another crisis 10 or 15 years from now," says Chris Bacon, a graduate student at the University of California at Santa Cruz, who is living in Nicaragua and writing his doctoral thesis on the coffee industry.
To that end, Oxfam and other groups are urging roaster companies to voluntarily pay a decent price to farmers and are encouraging consumers to buy more fair-trade coffee. Another proposal is for the United States to adopt stricter quality standards similar to those in Europe.
Current U.S. guidelines require that only 75 percent of raw, imported coffee consist of good coffee beans. That means up to 25 percent can be triage - spoiled beans, sticks and rocks that are mostly filtered out in the roasting process. By raising the requirement to 95 percent, some 10 million bags of coffee would be removed from the market, a move that might help ease the current glut.
But so far, the Bush administration has ignored the idea. And laissez-faire economists argue that a rescue plan will work only if it hews to the law of supply and demand.
Others, however, scoff at the notion that market forces behind the crisis will somehow provide the way out.
Back in the mountains of Matagalpa, the dilemma evokes benumbed resignation among Bibiano Mendoza and the other coffee pickers. Their only option, it seems, is to wait for a better day that may never come.
"Coffee prices have to go back up," Mendoza says.
"At least I think they do."
NICARAGUA
Nicaragua is the second- poorest country in the Western Hemisphere after Haiti.
Size: 50,193 square miles, slightly smaller than New York state.
Population: 5.07 million.
Average years of schooling: 4.6 (2.1 in extremely poor areas).
Infant mortality rate: 32.52 deaths per 1,000 live births. Unemployment: 12.7 percent.
Underemployment: 30 percent.
GDP per capita: $ 779.
Main exports: Coffee; shrimp and lobster; cotton; tobacco; beef; sugar; bananas; gold.
Coffee: Provided 25 percent of export earnings and nearly half of all rural jobs in 2000.
Sources: U.S. Agency for International Development, CIA's World Fact Book 2002
TWO WAYS OF GROWING COFFEE
Conventional 'shade' plantation
Coffee trees grow in rain forest or under other trees.
Birds live in trees, control insect pests.
Trees' shade keeps soil moist; tree roots prevent erosion.
SOME FACTS ABOUT COFFEE
Most coffee trees are grown between the Tropic of Cancer and Tropic of Capricorn at altitudes ranging from sea level to 7,000 feet.
Coffee is made from seeds, called beans, found inside coffee cherries.
There are two basic types of coffee beans -- arabica and robusta. Arabica, which tastes better, is difficult to grow, prone to disease, requires hand cultivation and yields smaller harvests per acre. Robusta is hardier, produces higher yields, is resistant to pests and diseases and can be harvested by machines. Robusta grows at sea level to 3,000 feet. Arabica grows above 3,000 feet.
Coffee cherries are harvested when they turn from green to red. The seed, or bean, is then removed from the fruit, dried and packed into bags before being sold to roaster companies.
Roasting gives coffee its flavor. Beans roasted longer -- such as French roast, Italian roast and espresso -- are darker and have a fuller flavor.
Specialty coffee is often roasted in small batches and sold as whole beans.
Most mainstream coffee sold in supermarkets is a ground blend of robusta and arabica beans from many different nations.
Source: Coffee UniverseThe Houston Chronicle:
